In this article, we demonstrate that a small degree of stochastic variation in the depreciation rate of capital can greatly reduce the comovement between hours worked and labor productivity in a neoclassical growth model. The depreciation rate is modeled as a Markov process to place a strict...

Accurate calculation of economic depreciation is essential for developing estimates of capital income, and stocks, and, by extension, for developing tax policy and financial accounting procedures. Accurate depreciation values are also necessary in empirical studies of economic growth and capital...

We construct a two-sector vintage capital model with neutral and investment-specific technical progress and variable utilization of each vintage. The lifetime of capital goods is endogenous and it relies on the associated maintenance costs. First, we show that the lifetime of capital is an...